If you know me, then you know I am a glass-half-full type of guy.
I am an optimist.
Something which is a challenge in this current crypto winter of ours.
So when I heard about this I had to have a deeper look.
Optimistic Oracle
Let's take a step back and answer these questions:
- What is an Oracle
- What about an Optimistic Oracle
- and who the fluff is UMA?
- and how does their Optimistic Oracle work?
What is an Oracle?
An Oracle definition ... source
An oracle is a person or thing considered to provide wise and insightful counsel or prophetic predictions, most notably including precognition of the future, inspired by deities. If done through occultic means, it is a form of divination.
Fantastic but it is not the Oracle we are talking about!
Take 2 ... A (blockchain) Oracle definition ... source
"An Oracle is a TRUTH MACHINE that records truths about the world onto blockchains"
In other words, Oracles aren't just responsible for getting data onchain.
They're responsible for making sure it's true. Fluff yes!
This can range from complex real-world scenarios to cross-chain messaging.
Real decentralization needs real oracles.
That definition btw was provided by Hart Lambur (at his Oracle Summit speech, you will hear more about him later, but he is the cofounder of UMA.
Truths can include a lot more than "What is the current price of $ETH?". They could include off blockchain events such as who the "2022 SuperBowl?" As well as blockchain events such as "Did this deposit happen on Optimism?" and "Did this governance proposal pass".
What about an Optimistic Oracle?
An optimistic oracle is a type of oracle that assumes that the data provided is correct unless it is disputed.
Optimistic oracles are used in decentralized finance (DeFi) applications, where they are used to provide data on the price of assets, the outcome of events, and other factors.
And who the fluff is UMA?
Risk Labs Foundation is the foundation and core team that is behind both the Across and UMA Protocols.
UMA Protocol is an optimistic oracle built for Web3
UMA is an optimistic oracle and dispute arbitration system which securely allows for arbitrary types of data to be brought on-chain.
UMA’s oracle system provides data for projects including a cross-chain bridge, insurance protocols, custom derivatives and prediction markets.
UMA's oracle is used to create many other types of products and protocols.
And how does their Optimistic Oracle work?
A decentralized truth machine UMA's optimistic oracle (OO) can record any verifiable truth or data onto a blockchain. source
The Optimistic Oracle verifies data in a 4 stage Process:
01 Statement
02 Challenge Period
03 Dispute
04 Voting
01 Statement
A statement is proposed as true
A natural-language statement is submitted along with a bond. The bond acts as a bounty for anyone to dispute it if they have evidence to the contrary.
02 Challenge Period
Most statements go undisputed
Anyone can propose an answer to a data request, and it is accepted as true if it is not disputed during the challenge period.
03 Dispute
Anyone can dispute a statement
Each statement submitted for validation is an opportunity for anyone to earn a reward by disputing it successfully. As the game theory would predict, disputes are rare in practice because the incentives are always to be honest. That makes the OO “optimistic”.
04 Voting
Tokenholders vote on disputes and earn rewards
The UMA token provides economic guarantees to the Optimistic Oracle. The community of tokenholders provide the human component, as voters, for the OO's final resolution on disputes or queries. Those who vote with the majority earn rewards.
One of the beauties with UMA is that successful voters will gradually own a higher percentage of the protocol than unsuccessful or inactive voters. In other words it pays to be active! Gotta love that.
This post is the first in a series on Risk Labs and is brought to you by #tengocrypto and @tengolotodo.leo
September 29th 2023 all information is freely available from the following sources and the views are not financial advice. As always Do Your Own Research.
Risk Labs https://risklabs.foundation/#hero
UMA - A decentralized
truthmachine https://uma.xyz/#how-it-works